Impact of AI on FinTech
The FinTech industry has grown tremendously in recent years, and it continues to grow due to emerging markets that entail digital financial services. Statistics show that the global FinTech market will reach $190 billion by 2026, growing at a 13.7% CAGR.
However, most of this growth in FinTech is being accelerated by specific segments such as software and digital payments. According to a 2019 research by the Cambridge Centre for Alternative Finance (CCAF), a significant portion (more than 70%) of FinTech firms have adopted AI in various ways for their key business functions. Let’s explore AI‘s impact on the FinTech industry?
What is FinTech Anyway?
FinTech is an abbreviation of Financial Technology. It entails the application of new technology advancements such as software, internet, applications, cloud services, and algorithms, among others, in the financial industry/ services.
Most FinTech products and services are built and designed to connect financial consumers and providers with technology for ease of use, efficiency, and effectiveness. They are also vital in business-to-business technologies (B2B).
In brief, FinTech significantly disrupts how the traditional financial and banking industries function by offering more advanced products and services using technology. Among examples of FinTech worth honorable mention include Cryptocurrency, Blockchain, Stock-Trading Apps, Mobile Payments, Insurtech, etc.
What is AI?
Artificial Intelligence (AI) is a branch of computer science that entails leveraging computers and machines to adopt/mimic human intelligence to perform tasks, make decisions and solve problems. Some define AI as “systems that act or think like humans,” while others approach it as “systems that think or act rationally.”
Examples of AI include email spam filters, self-driving cars, Siri (smart assistant), disease mapping, facial detection, recognition, search and recommendation algorithms, chatbots, etc.
So, how does AI impact FinTech? Keep reading down here.
Ways AI has impacted the FinTech Industry
Automation is one of the significant aspects that have made AI relevant to the FinTech industry. The Covid-19 pandemic was one of the key accelerators for the automation of FinTech firms/ businesses.
Through the help of AI, FinTech players have embraced automation of most operations such as automated payment processing, customer support, billing/invoice, accounting, etc. Additionally, advanced systems effectively automate human resource management, especially with the norm of remote working.
Automation of the FinTech functions through the help of AI has significantly reduced the cumbersome tasks that could take a lot of human energy and time to finish. Additionally, automation cuts down costs and increases productivity.
2. Secure payments
One of the major issues that have been facing the FinTech industry is fraud and security breaches where businesses and their respective customer have lost millions of money. However, the integration of AI into the FinTech operation has profoundly enhanced a secure platform for transacting.
AI has brought about proactive measures such as strong user verification and authentication, constant payment monitoring, etc. Additionally, AI data analysis is essential in fraud detection and prevention.
3. Data-driven decision making
FinTech firms have a lot of data about their customers and can access other databases from relevant agencies/ institutions. Through the help of machine learning, FinTech firms can quickly analyze data and make sound decisions on various aspects such as the credit of a customer and the marketing of their business.
4. Predictive analysis in financial services
Predictive analytics is one of the AI elements that is driving forward and transforming the FinTech industry. Different financial providers are constantly learning some of their respective customers’ critical needs, such as personalized solutions, better customer experiences, easy access to products and services, etc.
AI, specifically predictive analysis, has been such “a great friend” to this industry. It utilizes structured and unstructured data to analyze patterns/ trends of a business in different aspects such as sales, purchases, payments, trades. Therefore, a business can accurately plan, forecast, and make viable decisions.
AI is a powerful tool if utilized in the right way. It has impacted FinTech in a good way that has brought about remarkable growth. FinTech itself is a whole revolution in the financial industry. Still, with the help of AI elements such as automation, data analytics, chatbots, and search algorithms, there is much efficiency and effectiveness in operations.
Businesses, institutions, or firms in the financial industry should take advantage of some emerging trends. They are all linked to AI in various ways. They include:
· Blockchain technology
· Machine learning
· Biometric security system adoption
· Contactless and secure payment solutions
· Digital/Virtual banking
· RPA (Robotic Process Automation)
· APIs (Application Programming Interfaces)
· Quantum computing